The Bakken boom: Rail terminal construction picking up speed

October 18, 2011

As the volume of crude oil pumped out of the Bakken continues to set records, oil companies are increasingly investing in rail facilities to move their product to market.

Since EOG Resources went online with a crude-to-rail transfer facility near Stanley in December 2009, several other facilities have been built and more are under construction or in the planning stage.

The capacity of rail terminals in the state is expected to reach 300,000 barrels a day by the end of this year. Terminals are projected to have capacity for 750,000 barrels a day by the end of next year and more than 800,000 barrels a day by 2013, according to the N.D. Pipeline Authority.

Article Photos

Jill Schramm/MDN • David Counts, left, and Daniel Weller with R&R Contracting of Grand Forks work at the transloading facility being built near Ross Oct. 13.

Jill Schramm/MDN • New rail tracks are being constructed for a truck-to-rail facility being built near Ross.

New terminals have yet to ramp up to their full capacity, however. In June, facilities were shipping about 70,000 barrels a day from the state, the Pipeline Authority estimated.

Terminals exist in Minot, Stampede, Donnybrook, Ross, Stanley, New Town, Zap and Dore, which is on the Montana border in McKenzie County.

R&R Contracting, which has an office in Grand Forks, built the EOG station and is involved with other oil companies to construct more facilities, including potentially another in Stanley. R&R Contracting recently doubled the capacity of a transfer station in New Town, originally built last year to handle 80 cars.

The contractor company is building a site with capacity for 400 to 600 rail cars northwest of Ross. The facility is expected to be completed by the end of November, said Mark Reimer, sales marketing manager.

Work is just getting started in Berthold on a transfer station that could be quite large when completed next year, he said. Details still are in flux on that project, which would include Enbridge and other companies.

"We are just building enough track to get them going this year so they can start bringing in frac sand. A lot of these are doing oil and sand," Reimer said.

A transfer station near Blaisdell was built to take fracturing sand, and similar projects also have gone on in the area, including an upgrade in Burlington to accommodate frac sand.

In addition, R&R Contracting has been involved in projects in Dickinson and eastern Montana.

Reimer said the demand to move oil by rail has been tremendous. Before the first loaded car leaves the station, expansion plans are under way, he said.

"I average two to three calls a week," Reimer said of oil companies interested in building. "The pipeline infrastructure is a long way out. Even when the pipeline infrastructure comes to be in place, there's still going to be a lot of truck-to-rail done."

Unlike a pipeline that takes everything to one place, rail opens access to various markets that often are more profitable. That's prompted companies such as Rangeland Energy of Sugar Land, Texas, to develop rail terminals. Rangeland Energy is building a crude oil terminal and rail-loading facility on a 274-acre site in Epping, along with a 20-mile pipeline. The company has reported that the $70 million COLT Hub will be completed by January.

Savage Companies of Salt Lake City plans to own and operate a large multi-user rail terminal in Trenton. Expected to be completed by the end of this year, Trenton Railport will bring in oil-field related materials and load and ship unit trains of crude oil.

The 270-acre site will include rail infrastructure, open space for oil field materials storage, and receiving capability for frac sand and other materials. Once operational, Trenton Railport employment is expected to be between 40 and 60 people.

Musket Corp. of Oklahoma started a major expansion in August of its rail facility at Dore. The facility will have a total outbound capacity of 70,000 barrels a day. Additions to the facility include a loading rack for unit trains, fixed tanks and a pipeline connection to Banner Transportation's Market Center Crude Oil Gathering System in North Dakota. Plans are to be operational in the first quarter of 2012, the company reports.

Hess Corp. of New York is building a $48 million terminal near Tioga that will begin shipping about 70,000 barrels a day in early 2012. It will have capacity to grow to ship 120,000 barrels of crude daily on two trains, each consisting of 100 rail cars. That crude will be coming in by pipeline rather than truck. In its initial announcement, Hess indicated the terminal would operate 24 hours a day, with about 20 employees per shift.

Bakken Oil Express, a subsidiary of Kansas-based Lario Logistics, this fall opened a 100,000 barrel-per-day crude-by-rail terminal near Dickinson that has room for expansion to 250,000 barrels a day. Great Northern Power Development also is looking at constructing a terminal at Fryburg in southwestern North Dakota.

Mountrail County recently approved construction of a 500-acre transfer station at Palermo that will be bringing in petroleum products and frac sand as well as exporting oil. Another transfer station is being talked about in Van Hook Township, east of New Town, Mountrail County planner Don Longmuir of Stanley said. It shows the strength of the industry, he said.

"People are looking at it and saying this is a real deal. It's here for a while so they are willing to make the investment," he said.

The railroads are investing to make sure their infrastructure and personnel are at adequate levels to support the oil industry.

Canadian Pacific Railway is rebuilding portions of rail line from Drake to New Town to handle the heavier traffic volume. The installation of more than 17 miles of rail replacement and upgrades to 41 crossings is part of $100 million in improvements planned by the railroad in North Dakota between 2010 and 2012.

CP Rail is expanding capacity on the New Town, Portal and Carrington subdivisions, including yard track extensions in Max, Harvey and Flaxton.

"It's all being driven by the increase in demand that we are witnessing for the transportation service that we provide. They are, in part, related directly to the demand for Bakken crude and the transportation of Bakken crude, but it's not limited to crude. The benefits accrue to our grain customers as well. They accrue to our intermodal customers," said Mike LoVecchio, spokesman in CP Rail's U.S. headquarters in Minneapolis.

The investments being made by oil companies and other industry shippers are a sign of optimism about the area's future, he said.

"That's a real vote for the state's economy and a vote for the transportation services we provide, and we welcome the opportunity to do it," LoVecchio said.

Burlington Northern Santa Fe Railway also is investing in infrastructure. The company currently is making improvements at Gavin Yard in Minot to accommodate not only the movement of crude oil and industry supplies but demand for rail by the coal, grain and construction industries, said Denis Smith, vice president of industrial products marketing, Fort Worth, Texas.

The movement of oil from North Dakota impacts BNSF's entire rail system because of the traffic generated to various regions of the country. In the past year, the railroad has hired 3,000 to 4,000 people throughout its system as well as upgraded rail, Smith said.

Some of the improvements target efficiency rather than infrastructure. For instance, BNSF has gained more capacity on its main lines because of system improvements that enable trains to move off main tracks onto sidings at higher speeds, he said.

Smith said more improvements can be expected as BNSF works to stay a step ahead of the oil industry and meet its demand for transportation.

"We do feel that we will be in sync with the terminals as their capacity comes on, so we are not foreseeing any sort of issues in terms of handling the growth," he said. "We feel that we will have enough capacity there to haul away a good portion of the Bakken crude."

He noted railroads have been hauling crude for 140 years so the practice is nothing new, even though the volume is greater than ever.

Pipelines will never completely replace rail because of the flexibility that rail provides in reaching more markets, Smith said. Rail also can be cost effective and has the added advantage of preserving product integrity during shipping, he said.

The biggest obstacle for shippers is the lead time necessary in ordering tank cars, he said. Rail car manufacturers scaled back during the recession so oil companies are finding less supply and longer wait times.